There are signs of buyer confidence returning to the housing market following a lift in sales and profits, according to Barratt Developments.

The Newcastle-based firm said despite testing market conditions during the six months to December 31, the group saw a two per cent rise in legal completions to 7,003 homes at an average selling price of £165,000, similar to last year.

Private completions were one per cent lower at 5,569 at an increased selling price of around £180,000 and social housing increased by 14 per cent at a maintained selling price of around £106,000.

It said recent sales had been "encouraging" and although below last year's record levels they remained above the group's historic norms and put it on target to increase its volume of sales.

Results on March 29 are expected to show an improvement in pretax profits.

Barratt is selling one to four bedroom homes at 15 sites throughout the West Midlands in towns including West Bromwich, Bilston, Nuneaton and in Birmingham at areas including Shard End and Erdington.

The group said it employed a wide range of incentives, plus strict controls on building costs, to secure satisfactory operating margins.

The business renegotiated supply contracts and offered first-time buyers deals on deposits, stamp duty and fixtures and fittings to encourages sales, chief executive David Pretty said.

In a trading update, the company added: "Overall, 2005 was challenging with the market adjusting from its earlier overheated levels to more normal levels of activity."

Barratt increased its land bank from 59,443 plots for flats and houses in 2004 to 63,000 by December 31, which equates to 4.4 years worth of building projects.

Mr Pretty said: "We feel we had a good result from our teams.

"We competed well because of our desire to achieve growth both in homes completed and pretax profits and we believe we are well placed for future growth."

He said the market appeared "steady and stable" and predicted a "modest" rise in house prices of between one per cent and three per cent over the year, which would give first-time buyers a "better opportunity" to get on the housing ladder.

It plans to open 125 new sales outlets by the end of the summer across England, Scotland and Wales - currently there are 450.

Barratt employs around 80 people at its West Midlands head office at Halesowen.

Mr Pretty said: "We expect volumes to increase and pretax profits to be slightly above the City's consensus forecasts of around £370 million."